Shares of PNB and BoB gained as report says the banks may take over smaller lenders.

Shares of Punjab National Bank and Bank of Baroda Ltd rose more than 2.5 per cent each.

The Union Government is working on next round of consolidation, which could see PNB and BoB taking over smaller lenders, according to a media report, citing a senior finance ministry official.

No decision has been made as yet and plans are only at proposal stage, the report added.

Punjab & Sind Bank can be merged into PNB, and big lenders like BoB can take over banks like Indian Overseas Bank, the report said, citing the official.

Shares of Punjab & Sind Bank and Indian Overseas Bank jumped as much as 6.35 per cent and 5.23 per cent, respectively

Earlier this month, the country's largest lender State Bank of India merged five subsidiary banks with itself, in a move seen as the beginning of consolidation in India's public sector banks.

Nifty PSU bank index gained up to 2.16 per cent, touching its highest since August 2015.